Zombies Among Us: The Mainstream Media and Financial Journalism

Whatever I do now, it’s in service to my desire to write. If I work for pay, whether as a consultant or a paid speaker, the objective is to earn enough to be able to write. For now, the blog is my main content distribution vehicle. Occasionally the word gets out via a freelance assignment that pays. When I accept a paid speaking assignment, it’s for the money and with the proposed audience and potential for increased exposure to the message in mind.

I started the blog three years ago as a marketing platform for a book about the business of the Big 4 audit firms. The blog and everything that’s come with it since has taken on a life of its own. I find, especially with the advent of my participation in Twitter almost two years ago, that there’s a million other ways to get the message out real time without stopping to write a book. However, as my recent online discussion with Felix Salmon proves, even those of us who seem to be embracing the new and rejecting the old notions of what it takes to be truly heard, to be taken seriously, to achieve a modicum of status amongst our “peers” are still suckers for the traditional measures of success.

So I will write the book. When? I’m not sure. Whenever I can afford to take the time off.

I saw pretty quickly that the blog filled a niche. No one else was writing about the audit/accounting firms as an industry. At least no one was writing consistently and hardly anyone was writing from the inside and critically. Most often the stories seemed to come directly from the firms’ own public relations professionals, the AICPA and later via the Center for Audit Quality, their official lobbying organizations. There are also the made-to-order spokespersons – professionals who appear independent and objective but who in essence are no more able to speak the truth than their former colleagues in the firms. Why? Because they owe their livelihood as pundits, monitors, special industry panel members, “independent” public company directors, and designated contrarians to the audit firms and to those that perpetuate the mythical value to the capital markets of an auditor’s opinion.

For someone who wants to be a freelance writer, potentially paid by the media organizations who I’m accusing of not stepping up to cover the audit firms in a critical manner, I’ve sure slammed those same publications often enough. You name it, I’ve stabbed at the New York Times, the Wall Street Journal more than once (some journalists by name), Crain’s Chicago Business, Bloomberg, The Chicago Tribune, even my beloved Financial Times. In some cases proxies did it for me, unsolicited.

It’s a long list.

Eventually I figured out that I was competing with the journalists. I could write the story (on the blog or as a paid freelancer) instead of them, probably in a more pungent way or I could serve them as a subject matter expert (SME) and give them a quote. That’s the reason, I think, why almost universally they would not identify me in print as a blogger but only as president of McKenna Partners LLC, my consulting arm.

In any event, with very little pitching, prodding, or poking on my part other than my high Google ranking for certain key words, they started to call me routinely for quotes. As things started to heat up, via the financial crisis and in some individual firm cases, the journalists must have realized that a new, fresh, provocative voice for their story could give them an edge. Unfortunately, they still run the stories driven by the audit firm PR pitch anyway. The “fraud and accounting misstatements will increase in a downturn” story is an example.

Almost three weeks ago I got this email from an editor at a respected, but recently troubled, business magazine:

“Here’s the pitch: I spoke with a Deloitte fraud auditor and subsequently some academics and forensic accountants and analysts and have been told that they’re all bracing for a new wave of aggressive tactics by management to either downright fudge numbers or use accounting gimmickry. Do you agree? Have you done any reports lately that might detail some of these red flags?”

I had a little talk with this editor and explained that this was a pitch. The firms, responsible for missing frauds like Madoff, Stanford, Satyam and for not calling out inadequate risk management and overly optimistic asset valuations at the financial firms were grasping for straws, looking to drum up business by hovering over the corpses. Deloitte was one of the biggest offenders in this regard, having lost so many clients to failure and takeover, many of them now suing Deloitte, they were desperate for work. I gave this journalist some other ideas and lots of other places to look for a real story and thought my job was done.

Freelance assignments and links/mentions in serious publications have picked up for me, especially from the UK, and from some previously reluctant mainstream publications, due to their own epiphany about the power of blogs and Twitter. Everybody is looking for more traffic and reader comments and now they see a blog with a healthy, consistent audience in their target niche that also attracts thousands of comments to be more attractive regardless of the “controversy.” I actually get pitches from journalists in mainstream publications to link and comment on their stories. Strange but true.

A few more things have happened recently that are really making me think harder about the power of the new content delivery vehicles such as blogs and various social media tools such as Twitter versus the traditional media model.

First, several local journalists here in Chicago have defected from mainstream media publications to join the Chicago News Cooperative. (I suspect they were already independent, recently cut, or on the verge of being cut.)

“At a time of declining resources in newsrooms across the nation, journalists must adapt to new technologies and devise some creative, innovative ways to fulfill our obligations,” O’Shea said, “so we can hold our government accountable to citizens and restore to our journalism the standards desperately needed in these troubled times.”

Noble, but borne of necessity not true desire. I imagine most of these journalists would rather be back comfy and cozy in their newsrooms writing for venerable institutions with supposed job security, health insurance, pensions and the camaraderie of like-minded colleagues rather than hitting the dog-eat-dog streets of independent freelancing supported by not-for-profits. There have been others recently – ProPublica, True/Slant and GlobalPost.com. They all espouse some kind of public interest or community journalism and a digital empathy. I am assuming these organizations pay their journalists, albeit more like independent freelancers than guild members. This is in opposition to the major beef many journalists have with the Huffington Post because, for the most part, they do not.

Which brings me to the second thing I heard recently… It seems a major media publication that recently cut scores of journalists tied the phone call to congratulate the survivors to a somewhat sinister request. An “offer you can’t refuse…” Give the editor names and contact info for at least five potential “community contributors” on your beat. These “community contributors” would be content providers who would not be paid. The high concept is to pump up “reader engagement.” Yeah. Kind of like asking a factory worker who’s being squeezed tighter and tighter as he watches layoffs all around him to cough up names of five potential scabs who would do his job in case the company decided to play hardball with strikers.

I told the skittish journalist that there are three kinds of people that might consider such an “assignment:”

The fully employed subject matter expert who can’t or won’t take any money for their contributions, but likes to write, to see their name in print, to build up their reputation as an authority in service to future personal goals which may or may not include their current employer – The negative here is this contributor is still taking money out of a professional journalist’s pocket. The other negative is that even the best, longest tenured, professional journalist can never substitute for a real subject matter expert, assuming no conflicts. That’s the attraction of these public figures, lawyers, academics, corporate executives. And then there’s the independence issue. As long as a journalist works for a media company who takes advertisements and other financial support from the subjects of their coverage they are beholden. They will never be as truly independent as I am, no matter how much the pure of heart idealists like to think so. That constraint on independence is called an editor who reports to a publisher and I saw it in action in the publication in question.

The mostly amateur blogger/freelancer who welcomes the opportunity to be published in a prestigious mainstream publication, benefits from having an editor, and is ready, willing, and able to produce when/how the publication requires – This contributor isn’t typically invested in the piece or is so invested that getting the word out is more important than getting paid. Activists and other “alternative voices” who have no desire to be professional writers but want to see their words in print to further their cause fall into this category. In both cases, these contributors are competing with paid full-time journalists and the complaint is they may be diluting the quality of the content if not monitored and edited closely. This is the fear amongst journalist and others of non-fact-checked, “irresponsible ” content produced by the stereotypical blogger writing in their pajamas in the basement.

A freelancer who is typically paid to write but may consider the opportunity to be published in a prestigious mainstream publication with a wide circulation – I could fall into this category. Nowadays, every time my content appears anywhere other than my own blog, I am asked by someone whether I was paid for it. Some just want to know who is paying and how much. Some are acting as watchdogs for the freelancer community, sussing out the scofflaws who do unpaid work and, therefore, take bread out of the mouth of those trying to maintain the value of their work and promote living wages for their contributions. I reserve the right to make choices based on my own personal needs and objectives and I will take the consequences of those decisions. I don’t usually answer these questions when posed in a confrontational manner but I’m always glad to help others find outlets for their work. The key with me is I rarely pitch. (Nor do I pay attention to most pitches because my blog is 99% all my own original content, except for book reviews which are inspired by others’ hard work on a slow, staggered editorial cycle here in the re: The Auditors newsroom.) I’m asked to do pieces, with the clear understanding I expect to be paid for my work, because no one else is writing about these topics in quite the way that I do.

Finally, there’s a publication in my own Chicago backyard, Crain’s Chicago Business, that’s never quoted me, never reached out, never even acknowledged I exist. They’ve started blogs and the journalists who author these blogs are, in some cases, on Twitter. One followed me unsolicited. ( I rarely follow first.)

I saw a story on October 17th online via Google Alerts that referred to their annual list of the largest accounting firms in Chicago. This was one more in a series that promotes their “lists” resource, a combination of free and paid content that is a staple in this market. I left a comment. No blog URL. No identification other than my first name.

“Hard to believe that Deloitte is still the biggest in Chicago, given that they’ve cut so many people in the last two years. Perhaps it’s due to the fact that they’re the only ones who have any kind of consulting business in the region to speak of. I’d like to see more stories about the “business of the firms” that are investigative and not so PR/promotional. Do you have a dedicated journalist covering the business of the firms? Why not? We have a huge Big 4 presence here, as well as having one next tier firm based here, Grant Thornton. With stories like the ex-Vice Chairman Tom Flanagan insider trading scandal at Deloitte, it would be good to have more insight into the firms to support both their employees (of which you say there are so many) and clients, as well as local vendors. In the meantime I guess folks will have to read my blog for news.“

Six people recommended this comment and there were no other commenters. I saw some traffic to my blog that day, a handful, but nothing noticeable. I thought Crain’s may have seen some traffic because of me because I tweeted it.

I didn’t hear from the Managing Editor Brandon Copple after this comment and my Tweets. Why does Crain’s create these lists? Well, I am assuming it’s intended to be a service to their readers that also brings in some revenue. It’s also a local business community booster. Deloitte figured prominently and positively this time, with no mention of what else has been going on there.

Crain’s is a booster. They haven’t written one story about Deloitte’s suit against their own Vice Chairman’s alleged insider trading since the news broke last Halloween. (I broke the story on Twitter and local press did not pick up until a week later.) Tom Flanagan, the Deloitte partner, was a pillar of the community, on the Lyric Opera Board and several others. Is there not a followup from the human interest perspective or to assess the impact on the local Fortune 500 companies where he was audit partner emeritus?

A couple of days later on October 19th, a I was surprised and pleased to see what looked like an in depth piece in Crain’s entitled: “Accounting’s Day of Reckoning.” Shock and awe, the Big 4 firms, the ones Crain’s so sweetly promotes through their largest firms list, the ones they seem to me to handle with kid gloves by reporting what the firms want them to talk about, refused to talk to the reporter about the story.

“But now, sometimes a Big Four firm will match our prices to keep the business,” Mr. DeYoung says. “Everyone is sharpening their pencil.”

(The Big Four — Deloitte LLP, Ernst & Young LLP, PricewaterhouseCoopers LLP and KPMG LLP — declined to speak to Crain’s for this story.)”

So I left another comment.

The Big 4 declined to speak to you for this story? That’s unforgivable. They don’t want to admit they’ve been struggling too? They’re undercutting each other and the next tier firms (KPMG), cutting people left and right (all four), forcing their staff to work longer weeks with no overtime pay (Deloitte mandates 50 hours chargeable/billable so you know what that translates to…) and pushing initiatives like “100 New Clients” (PwC). Guess who’s going to be knocking on your door before the holidays?

And then there’s the lingering local lawsuits and scandals like the Tom Flanagan case at Deloitte and the Huron lawsuits naming PwC…

Going from 369 k to 365 k is the equivalent losing their semiannual Starbucks budget. With all these pressures how have they maintained payouts to partners even at that level? By balancing the work on fewer and fewer staff. Beware the partners and directors who want to charge you their rates for work that can be done by much lower levels, the unsupervised staff, (even more so than ever before) and the scope creep whenever possible.

If the Big 4 wouldn’t talk to Crain’s maybe they should stop all the fawning, rah rah coverage and start talking about some of the things I do.

This time eighteen people recommended the comment and I’ve seen almost a thousand referrals to my site from Crain’s since. I called Mr. Copple, Crain’s Managing Editor, the next day and asked him if he had seen either of my comments and what the impact of my Tweets about both comments had been on their traffic.

“How would I know that?” he responded.

What I know is Crain’s is wasting its time with blogs and even with their an online presence if they can’t see how all the tools and resources available to them and others fit together. If you think they should use me and my content somehow, leave a comment there. Tell them you want more news of the firms in their publication. They clearly can’t yet see someone and something that already meets their reader’s needs.

Even when it’s sitting right under their nose.

I can only do so much if they insist on rolling over and playing dead.

Great post, covers a lot of ground on the changing landscape between media, new media, and what some may call ‘new, new media’ or ‘social media.’

Also very interesting regarding the issue of subject matter experts vis-a-vis journalists. (Expanding on this concept, perhaps, is the question of the extent to which professional (and/or ‘degreed’) journalists become subject matter experts (e.g., accounting, law, etc.) and vice versa.)

Regarding your upcoming book, (which I look forward to reading) you say, “I will write the book. When? I’m not sure. Whenever I can afford to take the time off.”

I guess it is not unusual for writers to take sabbaticals to write a book; just yesterday NYT’s Joe Nocera wrote: “There comes a time in the life of every book writer when he or she has to stop procrastinating and write the darn book. For me, that painful moment has arrived; this is going to be my last column for a while.”

I think your blog has a large following, in part, because it fits so naturally into the medium of blogging with its related intimacy and immediacy, and I’d hate to see you disappear from the blogging scene even for a brief period to write your book; maybe some other options would help you do both. For example, I think its great you have some occasional guest writers and I don’t think your audience would mind, as long as you are overseeing from an editorial point of view.

Another possibility is for you to get someone to transcribe your thoughts for you, (with respect to your book) e.g. if someone interviews you or simply transcribes stream of consciousness tapes that you record, (almost writing a book from tape, vs. reading a book on tape), that may be a way to help with your book (which should perhaps go direct to screenplay anyway, from what I’ve seen in your blog!)

I guess if Joe Nocera is taking some time off I need to stick around a while so I can help fill the void. He’s one of the good guys and covers the topics we’re interested in well. On the other hand, a great journalist writing the book that I’m meant to write because they can take a paid book leave is what I’ve been afraid of…

Recording the content is a great option. I need to find the right mini-tapeee . Certainly anyone who knows in person me will tell you that when you wind me up it’s hard to turn me off. Might as well make it productive.

the reader needs to sort out what is rumor building on various blogs versus news — unfortunately, the society seems to catch on to rumor rather than news these days

second, i believe it is the Association of Certified Fraud Examiners, rather than Society (for future reference)

As you know, there is a sense that with the cuts in monitoring/compliance and auditing budgets by MNCs as one of the reactions to the crisis, and with additional pressures on emerging markets to produce results at these MNCs, there will be fraud to investigate in the future. Companies have cut back on services (i.e., let’s just get a statutory audit this year in XX market rather than a full service audit) not just audit services, but also outsourcing internal audit, compliance visits, etc. As a result, it is reasonable to assume that fraud could pop up in the future. The high rotation in IA in many MNCs coupled with fewer visits due to cost cutting contribute to this environment unfortunately. So, auditors may be in a situation in the future where they may have a client who has a fraud in a division/area where the auditor didn’t perform services because a local firm was hired to perform statutory services.

As far as a story, perhaps it would be interesting to contrast the services and metrics of a publicly held consulting services firm versus a big 4.

This article rings of a bit of personal PR promoting (i.e., call me because I know what I am talking about and the desire to be validated by Crain’s)– the very thing you are criticizing others of doing. As you know, many media outlets are struggling these days for content as advertising dollars are stretched as well during the crisis. Journalists are competing for content.

The “fraud is increasing story” is hollow. We’ve seen fraud before and we’ve seen plenty of fraud in the years since Sarbanes-Oxley and the supposed heightened focus on it by both companies and their advisors. Just look at the growth of the firms’ investigations practices to look at stock options backdating and FCPA. Ok, someone will split hairs and tell me that was not technically fraud but compliance but the reason some are going to jail is that there was fraud against shareholders by not complying.

I will fix reference to Association of Certified Fraud Examiners.

And yes, there was a strong element of self-promotion here but also a lot of other content and opinion. I’ve worked more than twenty-five years in the business and I do know what I know. And yes, I can’t for the life of me figure out why Crain’s, of all organizations, has not taken advantage of that, even now after I have reached out. Hell, the blog itself is not what it is without me, a person behind it. And it can’t meet my objectives if I do not promote myself and the content I can provide. I try to make a living to further my objectives. It’s why I’m here. I work to write. I’m making that pretty clear.

Yes, journalists are competing for content, so why ignore so much of it when I provide it more or less for free? I am readily available to journalists and have spent plenty of time educating them about the industry and they me about the media business, for mutual benefit. I write for money and I act as a subject matter expert for them without compensation. Which happens when is now mostly my choice.
Francine

[…] on this case. Crain’s Chicago Business hasn’t written anything since November of 2008, despite my encouragement. I was quoted in the Chicago Tribune later that week in November 2008 after several others, […]

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About the author

Francine McKenna (@retheauditors) is the Transparency Reporter at MarketWatch.com, a Dow Jones publication, where her work is also featured frequently in the Wall Street Journal. McKenna had more than twenty-five years of experience in consulting and professional services including tenure at two Big 4 firms, both in the US and abroad before becoming a journalist. Look for her prior columns, "Accounting Watchdog" at Forbes.com and "Accountable" at American Banker. For more information, click "About" at the bottom of this page. For more information contact Francine McKenna, fmckenna@mckennapartners.com